Patent portfolio races in concentrated markets for technology September 2010

Patent application numbers grow exponentially in many industries, a phenomenon that has been linked to high fragmentation of patent ownership. Contradicting these findings and theoretical arguments, we show that such fragmentation is not a precondition for sudden and strong increases in patenting. We describe and analyze a patent portfolio race in an industry with highly concentrated patent ownership, namely the newspaper printing machines oligopoly. Triangulating data from patent analysis, interviews, and document research, we find that patent strategy change by one player triggered a patent portfolio race with its main competitor. Implications for managers are that increasing patent output may yield temporary advantages but, as in a price war, implies the risk of a prisoner’s dilemma-type outcome with potentially severe implications for effectiveness and efficiency of the innovation process.